Contingency Planning and Disaster Recovery after Hurricane Sandy

By Scarinci, Cynthia A. | The CPA Journal, June 2014 | Go to article overview

Contingency Planning and Disaster Recovery after Hurricane Sandy


Scarinci, Cynthia A., The CPA Journal


Contingency planning is a process through which businesses develop a strategy to deal with unanticipated events that would impede daily activities or normal operations. Although planning for the unexpected sounds like a contradiction, it is a sound business practice. A key part of this planning is the identification of a business's risk exposure, which can result from a variety of factors, including economic conditions, geographic location, financial health, political environment, technology, data integrity and security, natural or environmental challenges, and prior disaster experiences. Risks vary by business size, location, and industry.

Once the areas of risk exposure for a particular business are identified, a plan of action should be outlined in order to facilitate the recovery from unexpected disruptions and the resumption of normal business activities. These disruptions can range from a minor power outage to a major natural disaster.

Unfortunately, most businesses are ill prepared for any type of unexpected event. According to the 2013 Disaster Recovery Preparedness Council Survey, 72% of businesses worldwide earned disaster readiness scores of either a "D" or an "F." A September 2013 survey of 100 small business owners in New York, New Jersey, and Connecticut after Hurricane Sandy revealed that more than two-thirds of those businesses did not have disasterrecovery plans in place (Wakefield Research, http://www.wakefieldresearch .com/blog/2013/10/07/small-bizunprepared-for-next-hurricane-sandy).

A One-Year Study

In October 2012, Hurricane Sandy caused major devastation in New York, particularly in the borough of Staten Island, and many small businesses are still struggling to recover. After the storm, small business owners made assessments of their losses, identified requirements to reopen their businesses, and applied for available financial assistance. After attending several post-Sandy forums and interviewing struggling small business owners trying to reopen their businesses, it became evident to the author that planning is necessary to help facilitate the recovery process and prepare for future disasters. It was also evident that many business owners were overwhelmed and unprepared. In an attempt to understand the state of small business disaster preparedness, this author conducted three separate surveys of Staten Island businesses, starting approximately four months after Hurricane Sandy and culminating in February 2014.

Survey 1: NYSSCPA Member Firms

According to the U.S. Census Bureau, there were more than 8,500 small businesses on Staten Island in 2011; of those, 65% had between one and four employees. Because of their limited resources, small businesses rely a great deal on external assistance. CPAs, for example, can act as a tremendous resource by providing financial, tax, and audit services. In addition, CPAs can offer advice on growth and development, investing, retirement planning, healthcare, regulatory compliance, and contingency and disaster recovery planning. This first survey aimed to determine how NYSSCPA member firms on Staten Island had prepared for disaster and whether they offered assistance to their clients.

Methodology. The survey was sent to all 97 NYSSCPA member firms on Staten Island; 27 firms responded. Of these, 80% have been located on Staten Island for more than 10 years.

Findings of Survey 1

Contingency/disaster recovery plans. The survey revealed that more than half of the respondent CPA firms did not have a contingency or disaster recovery plan in place prior to Hurricane Sandy. Approximately 40% had an informal plan that they had discussed but not documented; approximately 7% had a formal plan. Nearly 42% of the firms that did have some type of a plan admitted that they never tested it. Of those that did not have any type of a plan in place, 60% did not think that a plan was necessary and 20% said that establishing a plan was too time-consuming. …

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